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February 22, 2012

PIMCO Quits SIFMA Splinter Group

Advocacy that favors banks over money managers given as reason

Pacific Investment Management Co. is leaving the American Securitization Forum, an offshoot of SIFMA that represents underwriters and holders of securitized debt. The bond fund behemoth cited what it believed was a lack of advocacy on behalf of the organization’s money manager members as the reason.

Specifically, PIMCO made the decision to leave after the American Securitization Forum declined to issue a statement about investors’ views on the nationwide foreclosure settlement earlier this month by five banks, Bloomberg reports, citing two people with knowledge of the matter.

According to the news service, PIMCO, manager of the world’s biggest bond fund, “informed ASF executive director Tom Deutsch of its decision in early February, said the people, who requested anonymity because the talks were private. The episode underscored Pimco’s concern that the trade group doesn’t advocate for debt buyers as well as banks that underwrite mortgages, the people said.”

PIMCO's issue with he settlement appears to be the associated costs that it says will be passed along to its shareholders.

Formed in 2002, the 350-member American Securitization Forum formerly operated as a part of SIFMA. In January 2010, ASF announced that it had chosen to terminate its affiliation with SIFMA.

In early February, five major U.S. banks agreed to a $25 billion government settlement over charges stemming from the practice of “robo-signing” and other actions the government called abusive to borrowers. An estimated one million borrowers may be affected by the deal.

The combination state-federal settlement announced on Feb. 9 will offer mortgage debt relief and $2,000 payments to borrowers who lost their homes to foreclosure.

The five banks—Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial—will be free from further government claims against them, but not any future investor and homeowner lawsuits that might be brought.